As stated in the FCPA Guidance, Exchange Act Rule 13b2-2 “prohibits officers and directors from making (or causing to be made) materially false or misleading statements, including an omission of material facts, to an accountant. This liability arises in connection with any audit, review, or examination of a company’s financial statements or in connection with the filing of any document with SEC.”
The SEC (and DOJ) often talk about the best ways to “empower” compliance professionals within a business organization.
If Rule 13b2-2 were amended to include a related prohibition of making materially false or misleading statements, including omissions, to a compliance professional in connection with a compliance review or related tasks – would compliance professionals be more “empowered”? Granted “compliance professionals” is a rather imprecise term, but then again so is accountant.
While pondering this question, recently the SEC announced this enforcement action James Thompson (the former CEO of Spyr. Inc.), Barry Loveless (the company’s former CFO) and James Mylock Jr (a director) “for making false and misleading statements to Sypr’s auditors.”
As stated in the SEC release:
“According to the SEC’s complaint, filed in the United States District Court for the District of Nevada, Thompson, Loveless, and Mylock provided Spyr’s auditors with false and misleading information about an SEC investigation into Spyr’s investment in a biotechnology company. The SEC alleges that the defendants told Spyr’s auditors that they were not aware of “any situations where the company may not be in compliance with any federal or state laws or government or other regulatory body regulations,” even after Spyr had received a Wells notice, settlement discussions with SEC staff had broken down, and management believed that an SEC action would be filed soon. The complaint also alleges that Thompson and Loveless signed Spyr’s 2017 Form 10-K and 2018 first quarter Form 10-Q, neither of which disclosed the potential SEC enforcement action. According to the complaint, Spyr was required by generally accepted accounting principles to disclose the potential SEC enforcement action because it was reasonably possible that it could lead to a material loss for the company.”
Without admitting or denying the SEC’s allegations, Thompson, Loveless, and Mylock agreed to pay civil penalties of $50,000, $75,000, and $10,000, respectively and Thompson and Loveless will be barred from acting as an officer or director of any public company for three years.